Tech Tools Help Increase Asset Values

LOUISVILLE, KY-As the volume of delinquencies and nonaccruals increase, Conexxus, a provider of compliance solutions to the mortgage industry, is helping banks be proactive to understand key documents to maximize their return on sales of nonperforming assets.

Through its outsourced platform, REO Optimizer, financial institutions can manage and reduce high levels of nonperforming assets and expedite the sale of distressed properties.

"We can significantly impact the return that banks have on their assets sales, but even more importantly, we can help the banks in managing and navigating through this process," said Jeff Reibel, CEO and founder of Conexxus. "It's a process that should happen well before the bank has even foreclosed on the asset."

Bankers do not have immediate access to or the time required to gather property information. For many bankers and lenders, it can often take 60 to 120 days to gather all key property documents. With REO Optimizer, documents are gathered within several days, he said.

"A lot of the banks are fighting to add people or they are converting employees, spending 50% of their time dealing with administrative-type issues and understanding what the property actually is," described Mr. Reibel.

"We can help make that a given and they can use the 50% of their time to actually manage the project. We've seen where our solution is implemented. It does impact the number of hours people are working and where they are able to focus their time which really should be managing the issue and moving troubled assets, not spending time just trying to figure out what the problem is."

The company is able to pull development documents from city, county and state governments, enabling financial institutions to quickly obtain required municipal documents (plans, permits, studies, etc.) and load them into the REO Optimizer platform in real time.

Conexxus provides the software to monitor readiness and organize critical due diligence in a searchable online portal for internal decision making and for sharing with prospective buyers externally and leverages relationships to bring buyers to the financial institution.

The company said its platform provides a secure, collaborative and searchable method to automate and monitor distressed assets and its key documents and data. Demographic data for each property can be loaded, enabling bank employees or potential investors to search at their leisure and based on their preferences.

"The documents themselves increase the property value in the eyes of buyers and thus help banks better leverage their knowledge in selling an asset, but without the software they become to burdensome and costly. Achieving maximum recovery levels is critical to banks maintaining adequate capital levels."

Bank of North Georgia, with $5.8 billion in assets, recently implemented the platform to maximize returns on direct sales to buyers. BNG is the largest of 30 banks of Synovus. According to Bruce Dearing, senior vice president of BNG, nationwide, most banks have very deficient collateral files with maybe only a survey or construction plan.

"This makes selling assets to investors nearly impossible, often putting banks in a position to take less for the property," said Mr. Reibel.

"Conexxus has developed a solution very unique to the industry that has enabled us to liquidate more than $300 million in assets. Additionally, we have significantly shortened our sales cycle. Before, it took up to 150 days to sell a group of assets. With REO Optimizer, we're selling them in less than 45 days."

Aside from homes, the nonperforming assets include residential construction, lots, developments, office buildings, medical office structures and warehouses. "It's not discriminating as to what types of properties you might see. It's something that is impacting all types of real estate," he said.

While the residential problem has been "busting" for some time, he says construction and development and commercial real estate loans are drastically distinctive today.

"The bank is going to need to take different steps and actions to help make sure they are managing the process differently. It is a very different type of buyer, it's a very different type of asset, and in a lot of cases, it's much more significant in dollar-size exposure than a couple of houses are going to expose the bank to. It definitely requires a proactive approach."

Big problems are escalating on the commercial real estate side of the market. "It's just a question of when these assets start to hit and how big of a problem it causes for the banks. The commercial real estate piece impacts a different tier of banks."

He said data shows all banks nationwide have shown drastic increases in nonaccrual status for commercial real estate loans. This is following a similar line as to what happened with construction and development.

Tautomation software company says that when the idea emerged for this new product the commercial real estate market was already showing signs of weakness.

By incorporating critical property data which may include surveys, construction plans, zoning and septic information with more than 15 search filters, banks are able to give interested investors a clearer picture of what's on the table.

The company's Conexxus Buyer Group supports bank clients' efforts to eliminate distressed development properties. By providing banks with qualified buyers, the goal is to reduce the number of non-performing assets and help lead the economy to recovery.

Possible buyers can search bank clients' databases and view properties, key data and related files with no service charge. Not only does this program provide a more efficient buy-sale process, but also ensures that prospective buyers are qualified and able to purchase the distressed property.